There are around 21,000 new businesses founded each year in Australia. And with a little over 2 million actively trading businesses country-wide in June 2014, there are plenty of good reasons to run your own small business.

We often get approached by self-employed clients and prospects enquiring about their home loan opportunities. And whilst many banks have tightened their credit policies when it comes to the self-employed, with the right help, there are still plenty of options available.

What are some things you need to consider as a self-employed borrower?

Know your numbers
Your self-employed status does not have to impact negatively on your borrowing potential, although the amount of information you can supply will ultimately decide which products are available to you.

Lenders calculate how much they are willing to lend using a combination of your credit score, salary (income) records, and their affordability calculations. If you are self-employed, your overall income and financial situation may be more complicated, so it is important to establish a solid track record of low expenses and high income.

Build a good record
Requirements vary depending on the lender but, generally, self-employed borrowers will need both to have been in business and to have held an ABN for at least two years.

On top of the usual loan application documentation, lenders may also require you to produce BAS statements, tax returns, bank accounts and perhaps a declaration from your accountant. Being concise and providing correct and accurate information to the lender will increase your chances of a positive outcome.

Do your taxes and reduce debt
Keep your taxes up to date so you can always show your most recent income history. And make sure the tax assessments are paid. Self-employed applicants are more likely to have their tax portals checked for anything outstanding.

It’s also a good idea to eliminate or reduce your other (personal) debt. Lenders don’t just look at the balance, even if its zero – they count the limits on your credit cards and assess them as risk or funds you owe!

Understand your options
The good news is that lenders do have loans for self-employed people, contractors and business owners. In theory, self-employed borrowers have access to exactly the same range of mortgage products as everyone else, so long as you are able to put down the necessary deposit and substantiate your income you have a good chance of getting an advantageous rate.

One option to consider is a Low Documentation (Low Doc) Home Loan. These are designed for self-employed customers and small business owners who may not have access to the financial statements and tax returns usually required when applying for a home loan.

‘’Low doc’’ simply means alternative forms of income confirmation (bank statements, financial statements etc) as opposed to PAYG slips and tax returns. With tax returns, we can also help you pursue a full documentation loan at standard rates.

Have a strategy
We recommend you consult with us, your mortgage broker, to formulate a plan for securing your loan well before buying your property. This allows you to build your serviceability based on expert advice and years of experience.

If you are self-employed, or know someone who is, and would like to learn more about your options, please get in touch with us on the details below.

One thing we love most about our profession as mortgage brokers is assisting our clients in achieving their financial dreams. We know that for many of you, buying your first home may be the biggest financial decision and commitment you ever make.

However, for some First Home Buyers, the whispers and stories they hear about buying a property encourage them to stay at home, or continue to rent, rather than get their feet on the property ladder. So, the purpose of this article is to dispel some of the “stories” we hear from those of you who are new to the property game.

Let’s take a look at some of our frequently asked questions from first time purchasers:

I need to pay off all my other expenses before I can apply for a home loan.
Not true! You can still secure a home loan if you have an existing student study debt, or a car loan. When a lender is assessing your ability to service a loan, they certainly look at your current expenses such as any outstanding loans or credit card limits – but just because you might have one or both of these expenses, does not mean you won’t get your loan approved.

Lenders look at your whole financial situation – your income, your expenses and other debts, the valuation of the property you are wishing to buy, and the percentage of that value you are hoping to borrow from them – before they determine your suitability to pay off the loan.

The parental guarantee scheme no longer exists
False. Security Guarantees are still an option for first home buyers, but not with all lending institutions in Australia.

A lender’s Security Guarantee is essentially a parent or family member acting as a guarantor to your mortgage, giving you the extra financial support needed to maximise your chances of meeting the requirements of the bank.

The parental guarantee scheme can give you a head start by making it easier for you to get into your home with help from others, and can be used to buy a home or invest.

You need a 20% deposit to buy your first home
Whilst this true in some cases, the size of the deposit you need to put down is actually dependent on various factors, including: what you are looking to buy, where you are purchasing, your current income and expenses, and which lender and product suite you choose to go with.

There are loads of lenders out there who will lend up to 90% of the purchase price, or even 95%. However, if you borrow over 80% of the total price of the property, you may be required to take out Lender’s Mortgage Insurance, or your interest rate might be slightly higher.

It’s cheaper to rent
It can be line ball, and again, there are many variables to this equation – such as where you buy, where you are renting, and which loan option you choose to go with.

We really can’t dispel this myth in a short newsletter article as there is a lot to take into consideration: rental price, bills, purchase price, stamp duty and other transaction costs, the expected mortgage interest rate, how much it costs to run and renovate the property, expected capital gains – and so on.

If this is one question you have asked yourself, we recommend you get in touch with us to talk about your specific situation. With interest rates at record 50-year lows, and some great pockets of purchasing opportunities, it might be a good time to take the plunge, or at least do a little research to inform your decision!

We hope that this article answers some of your questions. And we’re sure you have more! Get in contact with our expert team on the details below and we will be happy to assist you with any questions you may have. Good luck and we hope to help you secure your first home soon!

14 Oct 2015

Spring is here! The sun is shining, the weather keeps improving, and with it often comes that urge for a thorough spring clean. With a more stable climate, and Christmas holidays looming in the not too distant future, October is a very popular time of year for home improvements and renovations.

And let’s be honest, we’ve all watched a few episodes of The Block and to produce a whole room in just one week looks easy, right?

Wrong. Before you get in your car and race down to your local Bunnings or Masters, before you call in the chippy to add that second level, or the bulldozer to dig the family pool you’ve been promising since summer 2010 – here are some quick pointers to make sure your spring spruce up runs on time, and most importantly, to budget.

Determine what work needs to be done
Take the time to walk around your home or investment property and decide what “needs to be done now” in terms of property maintenance and security, and what would be a “nice to do”. If you have big plans that will require council permission, make sure you ask the experts for input and advice. Use this time to plan what schedule you would like the work to follow, and if you are using multiple tradespeople, what order you need them to work to so that the process is as efficient as possible.

Remember, little things can make a big difference. It’s important to decide early if you are after a full blown renovation, or just a simple tidy up. Sometimes doing something quick and easy like changing a light fixture or painting the walls can breathe a big burst of fresh air into your home.

Set a budget, then add a little buffer
If you’ve never renovated before, it can be difficult to know where to start with estimating your budget. Step one – ask a lots of questions. Use tradie’s expertise to anticipate costs for all facets of the renovation or landscaping. If you’re just doing something small like a paint job, or some planting, think about the costs of materials, and time investment. Write all this down in a clear budget – there are loads of free templates online. Once you agree to your expenditure, it will provide clarity and ensure things don’t spiral out of control.

It’s also wise to allow a 10-15% buffer either side of your total projected costs – as a ‘just in case’. With unpredictable weather, or other commitments, it pays to cover yourself should things push out.

Secure financing, if you need to
Once you set your budget, you will know how much money you need to spend to get set for spring. There are loads of ways you can finance your renovations: dip into your savings (or the bank of mum and dad), take out a home equity loan, redraw from or refinance your current mortgage, use your credit card or take out a personal loan.

Which option is right for you will depend on your individual circumstances, and what you want to achieve. That’s where we come in. Please get in touch with us on the details below and we will help you determine which option best suits your needs and serviceability. Once this is done, you are one step closer to calling in the builders and making your renovation dream a reality.

Track your spending
So you have made a budget, and you have organised the funds. Now, you need to stick to it. We suggest you use a simple spreadsheet to track your expenditure. Remember, your budget needs constant attention. Make sure you continually assess what has been spent on all aspects of the project. Using the spreadsheet will allow you to easily and quickly see when and where costs are starting to blow out – so you can jump on the front foot.

Enjoy it
The sun is out, you’re investing in your home or investment property, it’s an exciting time and we wish you well! Remember, good planning and sticking to your budget will help to make this an enjoyable and successful experience.

If you’re planning to renovate or spruce up your home this spring, we can help with finance options! For more information, contact us today.

We hope you are out and about looking at properties in the fantastic spring weather! Yes, the busy spring property season is well underway – and there’s plenty of great housing stock available. If you’re in the market to buy right now, the good news is that APRA’s recent tightening of controls on investment lending seems to be having a positive effect on home price rises!

At its October meeting, the Reserve Bank of Australia (RBA) decided to keep the official cash rate on hold at the record low rate of 2.0 per cent for the fifth month in a row. Market analysts are undecided about the RBA’s next rate move, with some predicting a further rate cut in 2015 and others speculating that there will be no more rate changes until late 2016 – both of which mean, of course, that buying conditions will remain good for quite some time for first home buyers, refinancers and property investors alike!

APRA’s new controls have had some effect on interest rates, both for Owner Occupier loans and Property Investment loans. If you’re in the market to buy your first home, upgrade or refinance, you can now access some of the lowest interest rates ever on record as lenders continue to adjust rates downwards to encourage business growth in this area. For property investors, some home loan interest rates have risen slightly, but still remain excellent value and easily accessible to those with an adequate deposit and good financials.

Auction numbers were down recently, because of various public holidays and major sporting events. Additionally, with market conditions starting to favour buyers a bit more, private treaty sales are becoming more popular and are reducing auction numbers in some states. Buyers are definitely out and about, however competition at auctions is not as fierce as it was during the autumn selling season – which was unusually busy because of very high interest from investors, particularly Chinese investors.

The table below shows the relevant auction numbers for each state and corresponding clearance rates, for the week ending Sunday 4 October 2015:

State

Number of auctions

Clearance rate

Victoria

90

68%

New South Wales

567

71%

Queensland

118

64%

South Australia

32

71%

Western Australia

10

75%

Northern Territory

4

33%

ACT

20

54%

Tasmania

4

50%

As mentioned earlier, there has recently been indications that home value growth is starting to slow down – which will come as a big relief if you are in the market to buy a property, particularly in Sydney. In most markets, home value price movements were very marginal this month, with only Melbourne showing a significant increase of 2.42% over last month and 14.22% over the last year.

Sydney showed a marked change in home value price growth, only increasing by a very marginal 0.06% this month, but still showing a rise of 16.72% over last year. Brisbane/Gold Coast home values rose by 0.83% last month and 4.88% over the previous year. Adelaide home values went down by 1.17% last month and 0.30% over last year. Perth was up by 0.50% last month but is still showing a fall in home values of 0.90% over the same time last year. Darwin is also showing declines in home values – down by 0.31% this month and 3.92% since last year. Hobart’s home values fell by 1.93% last month and 0.59% since last year. On the bright side, the Canberra market is starting to pick up again, showing a 1.00% increase over last month and a 0.59% increase since this time last year.

With interest rates on the move and becoming more competitive, now is a great time to talk with us about a home loan health check to ensure you’re getting a competitive rate in today’s environment. We’re also very pleased to offer our assistance to those of you looking to build wealth for the future by investing in property. Remember, we’re here to help you with your financing needs according to your personal financial circumstances and goals, so please don’t hesitate to give us a call for a chat today.

The information provided in this newsletter is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs. Information sources: Auction results: www.realestate.com.au. Home values:www.corelogic.com.au